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Home My WebLink About2000-01-19 City Council (3)TO: ATTENTION: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL FINANCE COMMITTEE 17 FROM:CITY MANAGER DEPARTMENT: .,ADMINISTRATIVE SERVICES DATE:JANUARY 19, 2000 CMR: 457:99 SUBJECT:ORDINANCE CLOSING THE- 1998-99 FISCAL YEAR, INCLUDING REAPPROPRIATION REQUESTS, COMPLETED CAPITAL IMPROVEMENT PROJECTS, AND THE YEAR-END FINANCIAL SUMMARY STATUS REPORT RECOMMENDATION Staff recommends that the Finance Committee review and forward the attached ordinance and associated exhibits to the City Council for its approval, authorizing: 1) closing the 1998-99 Budget; 2) reappropriation of 1998-99 funds into the 1999-00 Budget; and, 3) closing completed capital improvement projects and transferring remaining balances to the appropriate reserves. BACKGROUND Exhibit C, "YEAR END SUMMARY", of the budget closing ordinance summarizes financial results for the fiscal year 1998-99 for the General Fund, Capital Improvement Fund, Internal Service Funds, and the Enterprise Funds. It provides an analysis of the performance of these funds in comparison to the budget as adopted and adjusted by Council throughout the fiscal year. The results of net operations are explained in terms of changes in the various fund reserves authorized by Council. Trends and factors affecting the City’s financial performance are identified and the impact of such changes is assessed. DISCUSSION The City’s financial position remains one of health and strength, with the General Fund reporting a net operating surplus of $2.8"million and Rate Stabilization Reserves for all Enterprise funds combined increasing by $7.6 million, meeting or exceeding guidelines. CMR:457:99 Page 1 of 3 These results, while positive, show a declining rate of growth from prior years and reflect a leveling off of the current economic expansion. With recent increases in interest rates and some analysts forecasting rising inflation, the City should take a conservative approach-to its finances and carefully review and prioritize requests for new spending. RESOURCE IMPACT Adoption of the attached budget closing ordinance allows for reappropriation and carryover of funding from the 1998,99 Budget for the completion of specific operating budget programs or projects in the current fiscal year. In addition, the closing of completed capital improvement project balances to the various reserves releases unspent monies for further appropriation by Council. The General Fund Budget Stabilization Reserve (BSR) has been capped in accordance with Council policy and the remaining surplus has been utilized to fund the Reserves for Emergencies to its Council-approved target and, finally, after adjusting non-discretionary reserves, the remaining General Fund surplus has been applied to the General Fund Infrastructure Reserve. Exhibit C, "1998-99 Year End Summary", highlights the changes for all reserve categories. POLICY IMPLICATIONS This recommendation is consistent with existing City policy. ENVIRONMENTAL REVIEW The action recommended is not Environmental Quality Act. a project for the purposes of the California ATTACHMENT Attachment 1 - Budget Closing Ordinance Exhibit A - 1998-99 Reappropriation Requests Exhibit B - Capital Improvement Program Projects Completed & Closed in 1998-.99 Exhibit C -1998-99 Year End Summary PREPARED BY:Stanley Arend, Accounting Manager Joyce Aung, Senior Accountant Amy Javelosa-Rio, Senior Accountant CMR:457:99 Page 2 of 3 DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: Director, A~[ninistrative Services CMR:457:99 Page 3 of 3 ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AUTHORIZING CLOSING OF THE BUDGET FOR FISCAL YEAR 1998-99 WHEREAS, pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto and as set forth in Section 2.28.070 of the Palo Alto Municipal Code, the Council on June 22, 1998 did adopt a budgetfor fiscal year 1998-99; and WHEREAS, fiscal year 1998-99 has results, although subject to post-audit adjustment, available and are herewith reported in summarized Exhibits ~A" and ~B" and ~C" prepared by the Administrative Services, which are attached hereto, reference made a part hereof; and ended and the financial are now financial Director, and by WHEREAS, pursuant to Section 2.28.080 of the Palo Alto Municipal Code, the City Manager did amend the budgetary accounts of the City of Palo Alto to reflect: (A) Additional appropriations authorized by ordinance of the City Council. (B) Amendments to employee compensation plans adopted by the City Council. (C) Transfers of appropriations from the contingent account as authorized by the City Manager. (D) Redistribution of appropriations between functional areas major activities, and objects within various departments as authorized by the City Manager. (E) Fiscal year 1998-99 appropriations which on July i, 1999 were encumbered by properly executed, but uncompleted, purchase orders or contracts; and WHEREAS, Article III, Section 12, of the Charter of the City of Palo Alto requires City Council approval of additional appropri- ations or transfers of appropriations from one department to another; and WHEREAS, fiscal year 1998-99 appropriations in certain departments and categories as shown on the attached Exhibit "A", while not encumbered by purchase order or contract, at year end are nevertheless recommended for reappropriation in the fiscal year 1999-00 budget; and WHEREAS, the Fire Department was over budget in benefits due partially to higher than anticipated paid leave charges and workers compensation payments; and $372,000 was reallocated from year-end savings in the Public Works.Department to cover this deficit; and NOW, THEREFORE, the Council of the City of Palo Alto does ORDAIN as follows: SECTION i. The fiscal year 1998-99 encumbered balances for the departments and categories shown on Exhibit ~C" shall be carried forward and added to the fiscal year 1999-00 budget. SECTION 2. The City Manager is further directed: authorized and (A) To close the fiscal year 1998-99 budget accounts in all funds and departments and to make such interdepartmental transfers as required by the Charter of the City of Palo Alto, by ordinance, in the 1998-99 budget as adopted or amended. (B) To close various completed Capital Improvement Projects as shown in Exhibit ~B" and move the balances into the respective reserve funds indicated in Exhibit ~B". (C) To establish reserves for all Funds as necessary to provide for: (i) A reserve for encumbrances and reappropriations in the various funds, the purpose of which is to carry forward and continue in effect the unexpended balance of appropriations for: (a) Fiscal year 1998-99 departmental expenditures which were authorized to be carried forward in Section 1 above. (2) Reserves for Advances to Other Funds and for Stores Inventory in accordance with ordinance and policy guidelines. (3) guidelines. A reserve for emergencies in accordance with policy (4) Reserves ~for utilities plant replacement, rate stabilization, and other reserves in accordance with Charter and policy guidelines. (5) The Budget Stabilization Reserve, in accordance with the General Fund Reserves Policy adopted by the City Council. (6) After providing for the foregoing reserves, transfer the remainder of the fiscal year 1998-99 excess of General Fund revenues over expenditures to the Infrastructure Reserve. SECTION 3. The sum of Three Hundred Seventy Two Thousand Dollars ($372,000) was reallocated from year-end savings in the Public Works Department to cover a deficit in the Fire Department as and is hereby approved by the City Council to confirm the action already taken by the City Manager. SECTION 4. Upon completion of the independent audit, detailed financia! statements reflecting changes in all the above sections shall be published as part of the annual financial report of the City as required by Article III, Section 16, of the Charter of the City of Palo Alto and in accordance with generally accepted accounting principles. SECTION 5. As ~pecified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 6. The Council of the City of Palo Alto hereby finds that the enactment of this ordinance is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. SECTION 7.As provided in Section 2.04.350 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. INTRODUCED AND PASSED: AYES: NOES:~ ABSTENTIONS: ABSENT: ATTEST: City Clerk APPROVED AS TO FORM: Senior Asst. City Attorney APPROVED: Mayor City Manager Director of Services Administrative EXHIBIT A 1998-99 REAPPROPRIATION REQUESTS 883,692 $ 99,036 $ 643,500 $1,732,861 $ 3,359,089 Administrative Services Department $37,000 Y2K public information campaign and remediation measures. $130,000 City Auditor $54,942 Expenses are included for the remaining months of the initial 18-month term for the bike station and ongoing improvements for the University Avenue Train Depot. Contract services. Community Services Department $34,000 Landscape renovation at Tower Well site. Fire Department $90,000 Disaster supplies and completion of the remodeling of the EOC. $20,000 Police $10,000 Re-printing of the earthquake preparedness publication "Living With Our Faults". Noise consultant to perform noise analysis for both compliance and planning purposes, including aircraft noise. The public information campaign is ongoing. Remediation cannot be undertaken until inventory is completed. Both the bike station and depot improvement projects are ongoing over a period of several years. Salary savings due to a staff vacancy in 1998-99 will be used towards contract services. Delay in processing contracts is due to funds not being available from CIP savings until late in 1998- 99. The positions for completing this project have recently been filled. Council approved funding as part of the implementation of the Emergency Plan. The positions for completing this project have recently been filled. Council approved funding as part of the implementation of the Emergency Plan. The project has been delayed due to difficulties in finding a vendor to perform the necessary work. The program was undertaken at Council direction. Planning $40,000 $15,000 Public Works $20,000 Preparation of a work plan for the Zoning Ordinance Update. Public education training sessions for the Historic Resource Ordinance and the Palo Alto Tree Manual. Page Mill Road mowing and bush removal (roadside clearing). Due to other Council assignments, the start of the work program for the Zoning Ordinance Update is delayed. This project will commence after an evaluation of all work assignments in the Planning Division. This funding is for preparing the work plan for starting the update. The training sessions were delayed pending Council direction. The Invitation for Bid (IFB) is currently in City Attorney’s Office for review. Work is expected to begin-in August or September. Public Works - Equipment Management $130,000 Body for leaf packer vehicle. $60,000 Outfitting for eight police patrol vehicles. The project was not completed due to heavier than normal workload, which included eight major purchases (i.e. two fire aerials, CNG-powered leaf truck, and two patient transport fire trucks). The project was not completed due to heavier than normal workload, which included eight major purchases (i.e. two fire aerials, CNG-powered leaf truck, and two patient transport fire trucks). Public Works - Storm Drainage Fund $61,836 I San Francisquito Creek Bank Stabilization and Re- I vegetation Study. Utilities - Electric Fund, Rates and Reserves Rate studies to implement Phase Four of Direct Access Continued work on this project is delayed pending preparation of cost-sharing agreement by Menlo Park The delay is due to an increase in the scope of work as well as requirements associated with of Direct Access. Community Services Department 19801 Planning 19813 $316,000 Renovation of school site irrigation systems as part of the City/school maintenance agreement 19401 19310 Public Works 19407 19505 19713 19707 19811 $150,000 $ 28,950 $530,703 $91,391 $69,054 $40,000 $58,9.51 $40,000 Street improvements to enhance bicycle and pedestrian safety and convenience. Study the feasibility and conceptual design of a new bike/pedestrian under-crossing of Caltrain at California Avenue. Development of a bike/pedestrian bridge and path. City Facility Water Back-flow Project Renovate Revenue Collections area and relocate staff to alleviate overcrowded condition Equipment recycling wash rack Replacement of standby emergency generators at fire stations and installation of a generator at Station 8 Purchase of a thermoplastic pavement marking machine Before the project can begin the school district must complete the planfiing process for the Building for Excellence Program. A backlog of work has delayed implementation of this project. A shortage in staff prevented the undertaking of this assignment until late in 1998-99. This project has been delayed due to an objection from the Caltrain Rail Union. This project was not completed in FY 1998-99 due to other existing workload constraints. The project had a lower priority than other assignments. The project was delayed in an effort to coordinate the project with the larger Citywide Space Plan Implementation project. The project was delayed pending completion of the Golf Course renovations. Staff was fully employed on the Rinconada Pool Renovation, Development Center, and several major roofing projects. This project will be completed in FY 1999-00. This item was ordered 1119/99 and it was received 7/27/99. EXHIBIT B CAPITAL IMPROVEMENT PROGRAM PROJECTS COMPLETED AND CLOSED IN 1998-99 Project Number Project Title Project Balance General Fund 19535 19705 ¯ Citywide Timekeeping System City Facilities Key System Replacement 217,812 75,000 Vehicle Replacement Fund 19816 MSC Garage Improvements 65,000 Electric Fund 8856 4/12 kV Conversion 9,297 Gas Fund 9907 9908 Poly Fusibn Equipment Replacement Ultrasonic Weld Testing Device 12,111 2,026 EXItlBIT C EXECUTIVE SUMMARY ECONOMIC AND BUDGETARY CHANGES Economic Outlook: According to the State of Cali- fornia’s Finance Bulletin, economic indicators show that Califomia, and the San Francisco Bay and Sili- con Valley areas, are continuing to enjoy a vigorous economic expansion. Moody’s and Standard & Poor’s confirmed this outlook when awarding the City the highest possible general credit rating this past year. Citing diversity of services, geography, job mar- ket and revenue sources as strengths, the rating agencies $20,591,0o0concluded that Palo Alto’s financial con- dition is excellent and the City’s future eco- nomic prospects are positive, despite the leveling off of the current boom. For example, the City’s unemployment rate is a low 1.7 percent, slightly up from last year’s 1.3 percent, and the median household income continues to be high at 180 percent of the national average. One factor indicating caution is that some financial analysts have predicted higher inflation in the coming year, which could adversely impact the City’s reve- nues. Capital Projects: While Palo Alto’s reserves and revenue sources are strong, the demand for services, especially capital investment, is high. The City’s ten- year plan for replacing and upgrading existing infra- structure calls for $95 million in expenditures. Together with proposed new projects, such as a pub- lic safety building, a park in the South of Forest Ave- nue (SOFA) area, improvements to libraries and traffic calming construction, the total proposed cost of these projects will require the City to carefully manage its finances and prioritize its capital spend- ing. $5,966,000 Employee Retirement Costs: Another significant future financial demand upon the City will be setting aside sufficient funding for post-retirement employee health benefits that the Government Accounting Standards Board (GASB) is expected to require within the next two to three years. To prepare for this eventuality, the City commissioned an actuarial study this year that estimated total liability for these benefits at $49.0 million. Less the $8.1 million the City has already reserved for this pur- pose, the current unfunded liability is $40.9 million. Of this amount, approximately $32.3 million would be attributed to the General Fund and approximately $8.6 million to the various Enterprise Funds. GENERAL FUND RESULTS Overall: In 1998-99, the General Fund ended the year with an operating surplus of $2.8 million, which is $2.3 million less than the 1997-98 result of $5.1 million. This trend is explained by a slowing of the growth rate in total sources of funds (revenues plus transfers in from other funds) and an increase in the growth rate of total uses of funds (expenditures plus transfers out to other funds). In 1997-98, total sources exceeded the budget by 2.8 percent while total uses were under budget by 3.6 percent. In 1998-99, how- cellaneous reserves allowed $2.1 million to be added to the Reserve for Infrastructure Improvements, bringing its balance to $14.7 million. 10.00 9.00 8.00 Millions $ 7.00 6.00 5.00 4.00 Property Tax. 93-94 94-95 95-96 96-97 97-98 98-99 (1) D~’~ot~ first y~o" of fLll EI~AF shift of 81.9 ¢dlliort ever, total sources and total uses performed close to budget, with a less than a one percent variance.The slowdown in revenue growth reflects a leveling off of the economic expansion, as was forecast in last year’s report. Comparing 1996-97 to 1997-98, total revenues increased $8.1 million or 10.7 percent; in contrast, comparing 1997-98 to 1998-99, the growth was less than half at $3.5 million or 4.2 percent. Also, the rate of change for expenditures has moved slightly in the opposite direction, with an $8.5 million or 9.2 percent increase between 1996-97 and 1997-98 comparing to a $10.0 million or 11.5 percent increase between 1997-98 and 1998-99. Reserve Highlights: The $2.8 million General Fund net surplus from operations in 1998-99 was sufficient to add $1.5 million to the Budget Stabilization Reserve (BSR), bringing its level to $20.6 million, the 20 percent of the adopted budget guideline set by Council policy. The Reserve for Emergencies was increased $. 1 million to bring it to the Council policy guideline, calculated at 10 percent of 1998-99 actual salaries and benefits costs. Due to a reduction in the market value of the City’s portfolio at year-end, the Reserve for Unrealized Investment Gain/Loss decreased by $.4 million to only $7,000. The Reserve for Streets and Sidewalks of $.3 million was elimi- nated, as planned in the 1999-00 Adopted Budget. These changes plus $.2 million in decreases to mis- REVENUE HIGHLIGHTS Sales Tax: After a significant rise in sales tax reve- nues in 1997-98 over prior year levels, sales tax receipts appear to have reached a plateau at the $20 million level. Modest sales tax gains are anticipated for 1999-00 and 2000-01. Business segments show- ing a gain last year include auto sales, miscellaneous retail, and restaurants. Tax revenues from auto sales have been a major contributor to the growth and have risen steadily for the past 12 quarters. Areas showing a decline over the past year include electronic equip- ment, deparmaent stores, and business services. While sales in the electronic sector have been decreasing steadily over time, weakness in depart- ment store sales has been recent, with contributing factors being construction activity at the Stanford Shopping Center and lower pricing from cheaper Millions $ General Fund: Sales Tax 26.00 20.00 . ~ 15.00 , 10.00 , 5.00 - 93-94 94-95 95-96 96-97 97-98 98-99 imports. It is prudent to conservatively project sales tax revenues in the near future. Recent interest rate hikes by the Federal Reserve, the cyclical nature of auto sales, and the rise of Internet sales could adversely affect this revenue source which comprises 19 percent of actual funding sources in 1998-99. Property Tax: Property tax revenue ended the year showing 6.9 percent growth over the prior year. Resi- dential and commercial property values continue to rise, with the average price of a single family home in Palo Alto at $630,000. Property tax revenues are anticipated to grow by at least 5 to 6 percent in 1999- 00. Utili& Users Tax: Compared to 1997-98, Utility Users Tax (I.JIY-I’) revenues increased 4.5 percent over the prior year. The primary sources of the increase were higher than projected electric and gas sales. UUT telephone revenues appear to be leveling off after several years of growth, possibly a result of the use of the Internet as a medium for communica- tion. Transient Occupancy Tax: Transient Occupancy Taxes (TOT) continue to show solid growth with a 12.1 percent increase compared to the prior year. The completion of renovations at the Cabana Hotel and the ability of other hotels to maintain and increase their rate structures contributed to this growth, while occupancy rates reached 80 percent. TOT revenues are anticipated to increase in 1999-00 with the open- ing of a new Westin Hotel next to the Palo Alto 6.50 6.00 lVillions $ 5.50 5.00 4.50 Utility Users Tax . 93-94 94-95 95-96 96-97 97-98 98-99 Sheraton. The robust local economy is the primary cause of several consecutive annual increases in TOT revenues. Departmental Highlights: Comparing actual expen- ditures plus encumbrances and reappropriations to the adjusted budget, City departments spent nearly all of their 1998-99 budgetary authority, with no depart- ment having savings in excess of 1.5 percent of bud- get. A total of $372,000 was reallocated fiom the Public Works Department to the Fire Department to 3 cover higher than anticipated paid leave and worker’s compensation costs. There are a number of reasons why departments have expended a higher percentage of their budgets this 8.00 6.00 Mllions $ 4.00 2.00 Transient O~upancy Tax 93-94 94-95 95-96 96-97 97-98 98-99 year. Preparing for a smooth Y2K transition has required resources in all departments, although espe- cially in Administrative Services. Efforts around emergency preparedness have also called upon city- wide resources, including improvements at the EOC and the preparation of contingency plans for Y2K. There are a number of other projects that have uti- lized resources citywide, including opening of the Development Center and historic preservation. The drier winter also affected expenditures. More water was used for irrigation and there was an increased opportunity for Public Works Field operations. CAPITAL IMPROVEMENT FUND Capital project expenditures and encumbrances were $21.0 million compared to an adjusted budget of $20.6 million in 1998-99. General Fund projects that account for significant expenditure of funds in 1998- 99 include: technology improvements such as office automation email and computer aided dispatch ($.8 million); park irrigation improvements ($.4 million); completion of a new water management system at Foothills Park ($.4 million); structural improvements on public buildings ($.7 million); contractual com- mitments for intersection improvements at Foothill Expressway and Page Mill ($1.8 million); complet- ing Rinconada Pool site improvements ($1.6 mil- lion); design of projects including a possible public safety building and parking structure ($1.1 million); and completion of major improvements at the Golf Course ($5.1 million). In addition, $2 million was transferred from the Cap- ital Improvement Fund to other funds. Of this, $1.7 million was transferred to the General Fund as reim- bursement for money advanced for Golf Course improvements and for projects that were closed or completed. The remainder of the money was trans- ferred to the Utility Funds and the Vehicle Replace- ment Fund for closed projects. INTERNAL SERVICE FUNDS The Vehicle Maintenance and Replacement Fund ended the year with increased retained earnings of almost $.7 million. In the Vehicle Replacement func- tional area of the Fund, $5.4 million was spent or Sales Taxes Property Taxes Utility Users Tax Transient Occupancy Tax Other taxes, fines & penalties Service fees and permits Charges to Other Funds Rental Income Other Revenues Add: Operating Transfers In Prior Year Encum & Reapprop E xDenditures Administrative Departments Community Services Fire Planning Police Public Works Non-Departmental Add: Operating Trans Out 1997-98 Actual $20,011 1998-99 1998-99 1998-99 Adopted Adjus~d Actual Budget Budget $20,200 $20,300 $20,226 1998-99 Budget Variance ($74) $8,903 8,635 $5,780 5,607 $5,846 5,871 $6,694 5,861 $8,872 8,849 $7,554 8,280 $10,022 10,180 9,135 9,521 5,950 6,039 6,350 6,551 6,686 7,255 8,588 8,731 8,455 8,890 9,994 10,238 386 89 201 569 143 435 244 $10,036 $12,824 3,068 $14,888 $18,484 $13,799 $5,702 $17,094 $11,692 $5,006 7,891 9,401 13,242 ~a $13,747 19,123 13,761 5,159 16,690 11,403 9,190 6,243 10,497 14,508 5,036 $17,435 20,894 15,235 6,966 18,249 13,428 5,235 7,068 9,743 (754) 14,314 (1941 5,036 0 $17,254 $181 $20,583 $311 $15,233 $2 $6,909 $57 $18,248 $1 $13,227 $201 $5,200 $35 7,116 (48) encumbered of the $6.4 million adjusted budget. During the year, eight major pur- chases were com- pleted, including two fire aerials, a com- pressed natural gas powered leaf truck, and two patient trans- port fire trucks. The Vehicle Maintenance functional area ended the year with retained earnings of $.25 rail- " lion, reversing a trend of the last several The Printing and Mail- ing Fund ended the year with expendi- tures slightly above revenues and had to use retained earnings to cover the imbalance. In its second year of operation, the Com- puter Replacement 4 Fund purchased or encumbered $1.2 million of a $1.3 million budget. UTILITY FUNDS RESULTS & SIGNIFICANT EVENTS Overall: In 1998-99, the combined utility funds ended the year with an operating surplus of $23.1 million, which is $11.4 million more than the 1997-98 result. Net bondproceeds account for $7.4 million of this increase, leaving $4.0 million as the growth due to reg- ular operations. In 1998-99, total sources of funds at $199.9 million exceeded the bud- get by $9.8 mil- RSCAL YEAR Electric & Gas Deregulation: Deregulation of the electric and natural gas industries now permits other utility companies to supply electricity and natural gas to Palo Alto customers. The City is evaluating its rate setting methodologies, accounting practices and out- side sales opportunities to more effectively compete in this new environment. This year, the City divided 1998-99 Water Electric Gas WWC WWT Refuse Storm Budgeted Revenue 16,951 83,380 18,769 18,665 22,532 24,7425,122 Expense 16,514 73,961 21,975 17,267 22,928 24,7425,411 Actual Revenue 16,734 90,273 Expense 14,664.73,064 Variance Revenue (217)6,893 Expense 1,850 897 21,479 18,561 23,239 24,784 4,866 21,499 16,274 23,206 22,832 5,295 2,710 (104)707 42 (256) 476 993 (278)1,910 116 Totals 190,161 182,798 199,936 176,834 9,775 5,964 its Electric and Gas Funds into two business units, one for supply services and the other for distribution ser- vices. While Palo Alto expects to main- tain market share with residential customers, com- petition in the commercial mar- ket is expected lion or 5.2 percent to provide a significant challenge to the City. while total uses at $176.8 million were under budget Bond Issuance: During 1998-99, the City issued $17.7 million in Utility Revenue Bonds to refinance two existing bond issues totaling $10.3 million and to finance rehabilitation of two incinerators for the Wastewater Treatment Fund. The new bonds are allocated between the Wastewater Treatment (64.6 percent), Storm Drainage (25.2 percent), and Waste- water Collection (10.2 percent) funds. by $6.0 million or 3.3 percent. Utility Reserve Highlights: In 1998-99, combined utility funds reserves increased 17.6 percent to $154.1 million. This year, all funds exceeded their budgeted reserve targets, except for the Storm Drain- age Fund. The Rate Stabilization Reserve (RSR) bal- ances for the Water, Electric, Gas, Wastewater Collection and Refuse Funds are above the Council- approved maximum guideline levels (the Storm Drainage Fund does not have a recommended guide- line). Of particular note, the Electric Fund’s Cala- veras Reserve, established to recover stranded costs, rose $15.5 million to $71.1 million, a 27.9 percent increase. As in the Electric’ Fund, the Public Benefit Reserve increased by $.6 million. Water Fund: Water Fund sales were $.5 million over budget, resulting from higher water consump- tion. Water Fund operating expenses were $1.2 mil- lion lower than budget due to lower than anticipated rates from the San Francisco Water Department. In addition, capital expenses were $.7 million lower than budget in 1998-99 as fewer water meters, fare hydrants, and galvanized pipe were purchased and replaced during the year. 5 Electric Fund: In 1998-99, Electric Fund revenues were $6.9 million over budget, however, compared to 1997-98, actual revenues declined $1.1 million. This reflects a $4.8 million decline in actual wholesale sales from 1997-98, offset by gains in other revenue categories. Electric Fund expenses were $.9 million under budget. Power purchase costs were $.5 million below budget due to rate decreases on the Western Area Power Administration (WAPA) contract. In addition, market prices for power were lower than 1997-98 due to favorable hydroelectric plant produc- tion. Gas Fund: The Gas Fund instituted a 7 percent rate decrease in 1998-99, which reduced actual revenues by $.5 million from the prior year level. Overall, Gas Fund revenues were $2.7 million above budget, pri- marily due to higher consumption because of cold winter weather conditions. Gas expenses were $.5 million under budget. Wastewater Collection Fund: Wastewater Collec- tion revenues were 99 percent of budget at $10.2 mil- lion. Total expenses in the Wastewater Collection Fund were $1.0 million under budget due to savings in capital expenses. Wastewater Treatment Fund: Wastewater Treat- ment Fund revenues are based on cost reimburse- ments from the Regional Water Quality Control Plant (Plant) partners. The reduction in operating revenues of $.3 million from budget reflects cost savings at the Plant. Operating expenses in 1998:99 were $.5 mil- lion below budget. Capital expenditures increased significantly in 1998-99 from prior year levels in order to fund equipment replacement and upgrades to keep the aging Plant fully functioning. As previously mentoned, this year, bonds were issued to finance rehabilitation of two aging incinerators at the Plant. Refuse Fund: Refuse Fund revenues were on bud- get in 1998-99. Operating expenses in the Refuse Fund were $1.9 million below budget. The positive vadance is attributed to lower than anticipated Clo- sure/Post Closure Liability funding requirements (after an adjustment by the State), lower than antici- pated hauling fees and taxes associated with the SMART station, and savings in salades and benefits and contract services due to vacancies. Payments to Palo Alto Sanitation Company (PASCO) were $.2 million, or 3 percent below budget. This year, the City’s refuse collection and hauling contractor was sold to another company. At a small increase in cost, the City successfully ~’enegotiated the existing con- tract to include additional routes and curbside mixed- paper recycling. S 20.000 S kS,000 - UTILITY FUNDS RATE STABILIZATION RESERVE (RSR) SUM M ARY ($000) $ lO.O00 S 5,000 Storm Drainage Fund: Storm Drainage Fund reve- nues were $.3 below budget resulting primadly from lower than anticipated interesl~ income due to declin- ing reserve levels. Overall, Storm Drainage expenses were $.1 million under budget. With the first phase of StormDrainage Master Plan capital work neadng completion and no additional capital projects bud- geted in 1998-99, capital expenses declined $1.8 mil- lion from 1997-98 levels. Staff will be seeking ratepayer approval for arate increase for the next phase of Master Plan capital work in spring of 2000. Balance @ 06/30/98 CAFR TO Budget Reconciliation: CAFR Fund Balance Less: Encumbrances- Reappropriations Net From Operations 45,904 (4,072) -(964) 3,233 (995) 294 Balance @ 06/30/99 49,137 (5,067) (670) Allocate To Reserves: Budget Stabilization Reserve Reserve For Infrastructure Improvements Notes Receivable Reserve Stores Inventory-Reserve Unrealized Investment Gain/Loss Reserve Reserve For Streets & Sidewalks Reserve For Emergencies 19,050 12,588 689 1,953 450 263 5,875 1,541 2,078 (210) (262) (443) (263) 91 20,591 14,666 479 1,691 7 0 5,966 COMBINED UTILITY FUNDS RESERVE ANALYSIS FISCAL YEAR 1998,99 Water Electric Gas WWC WWT Refuse Storm Beginning Reserves 8,331 85,405 17,750 7,795 4,618 6,561 520 To (From) Reserves 2,070 17,209 (20)2,287 33 1,952 (429) Endi~’ 8~513 91~: Budgeted Reserves 8,747 94,786 14,515 9,182 4,222 6,561 231 % of Budget 119%108%122%110%110%130%39% Totals 130,980 23,102 138,244 111% FISCAL YEAR 1998-99 Water Electric Gas WWC WWT Refuse Storm Totals Rate stabilization (RSR): General RSR Supply RSR Distribution RSR Total RSR Emergency plant replace Calaveras Underground loan Conservation loan Water Resources Board Shasta rewind loan Central Valley Project Public benefit program 9,547 9,678 3,372 7,923 91 19,184 7,445 5,413 8,936 9,547 24,597 16,381 9,678 3,372 7,923 91 854 2,316 715 404 1,279 71,072 60O 867 990 2,172- 634 590 30,611 26,629 14,349 71,589 5,568 71,072 6OO 634 590 867 990 2,172 FISCAL YEAR 1998-99 Water Electric Gas WWC WWT Refuse Storm Beginning RSR 7,502 22,680 16,433 7,407 3,427 5,971 520 To (From) RSR 2,045 1,917 (52) 2,271 (55)1,952 (429) 9;547 24~597 ~6~381 ~9~678 7,923 91 RSR Maximum 7,865 19,000 6,802 5,052 3,598 3,715 n/a RSR % of Maximum 121%129%241%192%94%213%n/a Totals 63,940 7,649 46,032 155% 1997-98 Act/Enc/ Reapprop REVENUE Water sales 11,949 Other revenues 1,080 Reappropriations /Enc 2,195 TOTAL REVENUE 15,224 EXPENSES Purchases 4,283 Other Expenses 6,583 TOTAL OPERATING EXPENSE 10,866 Capital Expenses 4,901 TOTAL EXPENSES 15,767 TOI(FROM) RESERVES (543) 1998-99 1998-99 $ Variance Adjusted Act/Encl Favorable ~Reapprop (Unfavor.) 12,150 12,615 465 1,608 926 (682) 3,1.93.3,193 0 16,951 16,734 (217) 4,620 4,114 506 7,721 7,050 671 12,341 11,164 1,177 4,173 3,500 673 16,514 14,664 1,850 437 2,070 1,633 REVENUE Electric retail sales Electric wholesale sales Other revenue~ Reappropriations / Enc TOTAL REVENUE EXPENSES Pu~hases NCPA & TANC Debt Svc Other Expenses TOTAL OPERATING EXPENSE Capital Expenses TOTAL EXPENSES TOI(FROM) RESERVES 1997-98 Act/Encl Reapprop 66,314 10,389 10,296 4,352 91,351 32,771 11,036 23,275 67,082 11,331 78,413 12,938 1998-99 Act/Enc/$ Variance Adjusted Reapprop Favorable Bud_qet ActuallEnc.(Unfavor.) 63,821 66,409 2,588 3,031 5,641 2,610 10,597 12,292 1,695 5,931 5,931 0 83,380 90,273 6,893 25,955 10,940 25,550 62,445 11,516 73,961 9,419 25,478 477 10,940 0 25,812 (262) 62,230 215 10,834 682 73,064 897 17,209 7,790 REVENUE Gas retail sales Gas wholesale sales Other revenues Reappropriations / Enc TOTAL REVENUE EXPENSES Purchases Other Expenses TOTAL OPERATING EXPENSE Capital Expenses TOTAL EXPENSES TO/(FROM) RESERVES 1997-98 Act/Enc/ Reapprop 17,173 1,056 1,912 1,866 22,007 9,719 7,302 17,021 4,636 21,657 350 1998-99 A~usted 15,210 0 1,787 1,772 18,769 10,325 8,165 18,490 3,485 21,975 (3,206) Act/Enc/ Reapprop ActuallEnc. 17,942 0 1,765 1,772 21,479 10,247 7,813 18,060 3,439 21,499 (20) $ Variance Favorable (Unfavor.) 2,732 0 (22) 0 2,710 78 352 43O 46 476 3,186 REVENUE Revenues Reappropriations / Enc TOTAL REVENUE EXPENSES Sewer Treatment Exp. Operating Expenses TOTAL OPERATING EXPENSE Capital Expenses Principal Payments TOTAL EXPENSES TO/(FROM) RESERVES 1997-98 AcUEnc/ Reapprop 10,450 5,513 15,963 4,158 2,260 6,418 10,393 175 16,986 (1,023) 1998-99 Adjusted 10,334 8,331 18,665 4,340 2,736 7,076 10,004 187 17,267 1,398 Act/Enc/ Reapprop Actual/Enc. 10,230 8,331 18,561 4,275 2,523 6,798 9,289 187 16,274 2,287 $ Variance Favorable (Unfavor.) (104) 0 (104) 65 213 278 715 0 993 889 REVENUE Operating Revenues Bond Proceeds Reappropriations /Enc TOTAL REVENUE EXPENSES Operating Expenses TOTAL OPERATING EXPENSE Capital Expenses Principal Payments TOTAL EXPENSES TO/(FROM) RESERVES 1997-98 AcUEnc/ Reapprop 11,870 0 2,984 14,854 11,443 11,443 2,538 380 14,361 493 1998-99 A~usted 12,564 6,500 3,468 22,532 12,070 12,070 10,450. 408 22,928 (396) Act/Encl Reapprop Actual/Enc. 12,271 7,266 3,468 23,005 11,570 11,570 10,994 408 22,972 33 $ Variance Favorable (Unfavor.) (293) 766 0 473 5OO 5OO (544) (o) (44) 429 REVENUE Revenues Reappropriations /Enc TOTAL REVENUE EXPENSES Payments to PASCO Other Expenses TOTAL OPERATING EXPENSE Capital Expenses TOTAL EXPENSES TO/(FROM) RESERVES 1997-98 Act/Encl Reapprop 22,324 881 23,205 6,854 13,997 20,851 2,150 23,001 204 1998-99 Adjusted 22,386 2,356 24,742 7,380 15,294 22,674 2,068 24,742 Act/Enc/ Reapprop ActuallEnc. 22,428 2,356 24,784 7,169 13,595 20,764 2,068 22,832 1,952 $ Variance Favorable (Unfavor.) 42 0 42 211 1,699 1,910 0 1,910 1,952 REVENUE Revenues Reappropriations / Enc TOTAL REVENUE EXPENSES Operating Expenses TOTAL OPERATING EXPENSE Capital Expenses Principal Payments TOTAL EXPENSES TO/(FROM) RESERVES 1997-98 Ac~Enc/ Reapprop 2,362 3,903 6,265 1,889 1,889 4,775 285 6,949 (684) 1998-99 Adjusted Act/Enc/ Reapprop ActuallEnc. 2,458 2,664 2,202 2,664 5,122 4,866 2,014 2,014 3,215 182 5,411 (289) 2,011 2,011 2,984 30O 5,295 (429) $ Variance Favorable (Unfavor.) (256) 0 (256) 3 3 231 (118) 116 (140)